"While the interest rate cut cycle may provide a boost to the overall market, defensive stocks typically outperform in the initial phases of such cycles," Sonam Srivastava, the Founder and Fund Manager at Wright Research said in an interview to Moneycontrol.
According to her, investors often seek stability and protection against potential economic downturns during this period. Therefore, she is currently focusing on defensive stocks, which are less susceptible to market volatility, although she expects growth stocks to pick up momentum in the next quarter or two.
With more than 10 years of experience in the investment management, Sonam believes the equity markets are poised for continued growth, driven by strong corporate performance and supportive macroeconomic factors. Before starting Wright Research, she worked with Edelweiss Financial Services, and HSBC Global Banking and Markets.
Do you see earnings headwinds for the financial space?
The recent interest rate cuts in the US could lead to similar moves by the Reserve Bank of India (RBI), making borrowing easier and potentially stimulating credit growth. However, given the current economic uncertainties, the impact on credit growth may be delayed. Additionally, concerns about net interest margins (NIMs) compression and regulatory changes could pose headwinds for the financial sector. While the overall outlook for the sector remains complex, the potential benefits of lower interest rates may be offset by these challenges.
Are you betting on growth oriented stocks as the rate cut cycle is likely to start?
While the rate cut cycle may provide a boost to the overall market, defensive stocks typically outperform in the initial phases of such cycles. This is because investors often seek stability and protection against potential economic downturns during this period. Therefore, we are currently focusing on defensive stocks, which are less susceptible to market volatility. However, we are also keeping an eye on value stocks, as they have been performing well in recent times. While we expect growth stocks to pick up momentum in the next quarter or two, our current focus remains on defensive plays. As the rate cut cycle progresses and economic conditions improve, we may shift our focus more emphatically towards growth stocks.
What is your take on the Federal Reserve's policy meeting? Do you see further rate cuts in upcoming policy meetings?
The Federal Reserve's recent policy meeting was a significant event, as they announced a 50 basis point rate cut. This decision marks a shift in monetary policy, signaling that the Fed believes the economy may be slowing down and that inflation is under control. Regarding future rate cuts, the Fed has indicated that they will continue to monitor economic data closely and adjust their policy as needed. While the current rate cut suggests a potential for further reductions, the exact timing and magnitude will depend on various factors, including inflation trends, economic growth, and labour market conditions.
Are the valuations reasonable in PSU space after correction?
The valuations of PSU stocks have become more attractive after the recent correction. While some PSU stocks may still be overvalued, many now offer reasonable valuations. When evaluating PSU stocks, consider company-specific fundamentals, sector-specific trends, and government policies. However, given the current market environment, defensive stocks may continue to outperform, even as PSU valuations become more attractive.
Do you see the rally continuing in equity markets given the more tailwinds than headwinds?
The equity markets are poised for continued growth. Economic recovery, earnings growth, low interest rates, and improving fundamentals are supporting the upward trend. While there may be short-term fluctuations as more economic data points are announced, the overall outlook remains positive. Investors can expect a favourable market environment, driven by strong corporate performance and supportive macroeconomic factors.
Will gold continue to shine?
Gold prices may continue to rise in the short term due to ongoing economic uncertainty and geopolitical tensions. However, as economic growth recovers as the rate cut cycle persists, the demand for gold as a safe-haven asset may decrease, potentially leading to a cooling of prices. It's important to consider these factors when making investment decisions in gold.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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